Why Can’t You Get Disney+ with Ads on Roku?
Why isn’t Disney+ with ads on Roku yet? It’s a match made in streaming heaven: Roku is the No. 1 streaming portal in the U.S. with 40 percent market share, according to a Q3 Parks Associates survey. (A Q4 NPD report placed it at 38 percent.) And by the time Disney+launched its ad-supported tier last December, it already claimed “more than 100 advertisers across all major categories.”
In a research note to clients of Australian global financial services group Macquarie (and obtained by IndieWire), senior media tech analyst Tim Nollen described Roku’s omission of Disney+ Basic with Ads as “hard to fathom.” However, there may be a simple reason: Not enough ads to go around.
Subscription-based streaming services kick back some money to the gatekeeper if a subscriber uses their platform or device (like Roku) to sign up. Ad-supported apps split advertising revenue with the device-maker who is bringing eyeballs into their shared ecosystem. Disney+ Basic with ads keeps its ad loads low — about 4-5 minutes per hour.
According to Colin Dixon, founder and chief analyst at NScreenMedia, that creates a relatively small pool of ad dollars that Disney’s not eager to share. He also pointed out that even the ad-free Disney+ didn’t have a deal to be on Roku at all “until the last minute” when it launched in 2019.
Those were tough negotiations and Disney and Roku are still in conversations about the ad-supported tier. They are “committed” to reaching an agreement, an individual with knowledge of the talks told IndieWire for this story. It’s just taking a while, and upfronts — the period in which a platform sells much of its advertising for the year — are around the corner; Disney’s upfront is May 16. An ad-supported Disney+ tier was announced a year ago; this is the streamer’s second upfront.
“Evidently the two sides are disputing the ad revenue splits,” Nollen wrote March 29, “but we think Disney’s opportunity cost is high without this presence.”
When you’re still trying to turn a profit, like Disney+ and other young streamers, an opportunity cost can truly be opportunity lost. And Roku represents opportunity: Active accounts reached 70 million by the end of 2022, up nearly 10 million from 2021. Streaming hours across Roku devices increased by 14.3 billion hours to 87.4 billion.
And, unlike Disney+, Roku is already profitable. In 2022, its gross profit grew 2 percent to reach $1.4 billion on revenue of $2.7 billion (up 20 percent).
It’s not all sunshine and rainbows over there, however. On Thursday, Roku revealed via a filing with the SEC it was laying off approximately 200 employees, or roughly 6 percent of its staff. The company is also bailing on some currently unoccupied office spaces. The restructuring, which aims to “lower the Company’s year-over-year operating expense growth and prioritize projects that the Company believes will have a higher return on investment,” will cost Roku $30 million to $35 million in severance and other expenses.
Nollen did not estimate what Disney could expect to make with ads on Roku, but Dixon has no doubt that Disney will prevail.
“Ultimately, Disney will win the dispute. It’s a case of Roku needs Disney+ more than Disney+ needs Roku,” Dixon said, although he acknowledged, “It will be awkward at the upfronts.”
Spokespeople for Disney and Roku did not immediately return IndieWire’s request for comment on the matter.
The Roku interface on a Roku-branded TV
Courtesy of Roku
After a challenging October-to-December quarter (Disney’s first fiscal quarter of 2023 and the final calendar quarter of 2022), core service Disney+ had 104.3 million global subscribers. Including Disney+ Hotstar (which doesn’t bring in much revenue), the tally grew to 161.8 million. Those numbers do not include Hulu and ESPN+ standalone subscribers, but would count anyone who has either or both of those services bundled with Disney+. (Hulu had 48 million subscribers; ESPN+ had 24.9 million.)
Disney’s direct-to-consumer revenue rose 13 percent in the quarter to reach $5.3 billion. The streaming business again lost more than $1 billion ($1.05 billion, to be exact). Disney still believes Disney+ will reach profitability in fiscal 2024.